Build a Winning M&A Strategy With Clear Growth Objectives

Often, a company will decide to embark on a path of growth through acquisition. Nothing wrong with that—mergers and acquisitions (M&A) can be a sound way of achieving growth goals. However, when pressed to answer the specific goals an acquisition will help their company meet – say a new service line or new geographic territory – some executives are hard-pressed to answer the question.

Business acquisition does not begin and end with the transaction itself. Building a winning M&A strategy starts with planning, and it should occur well in advance of any discussions with potential targets. Furthermore, that planning process should be thorough, and 100 percent honest.

If your company has a strategic plan in place, any planning conducted for purposes of a potential acquisition should align with it. If it doesn’t, then you should either adjust that strategic plan accordingly, or if you can’t or won’t do that, you should reconsider the whole idea of acquisition. Likewise, does your company have mission and vision statements? If so, revisit them, and make sure they accurately reflect your growth objectives. If you don’t have mission and vision statements, now is the time to create them. Let’s look at both.

Mission Statement

Your mission statement articulates what your company does and explains its reason for existence. Understanding that purpose in clear terms will help you and your leadership team determine if a potential acquisition could enhance that greater purpose, as well as the ways in which that might occur. If such an acquisition could lead your company to deviate from its purpose, the repercussions could be far-reaching—and usually negative.

Vision Statement

Your vision statement must reflect what you (you being the acquiring company) want to be in the future. It should focus on the long-term aspirations of your company. Without a vision statement, you won’t really know what type of acquisition (if any) is appropriate.

Once your company’s mission and vision statements are refined or created, you (the owner), your management team, and your advisors will have the foundational knowledge and resources necessary to begin reviewing target companies—and evaluating the extent to which they complement your company vis a vis these statements.

This takes us to the next stage of M&A strategy—developing a Target Value Statement.

Once you’ve identified a potential target company, you and your team will conduct some basic research. That’s fine. Yet before due diligence begins, before economics of a transaction are discussed internally or between both parties, and certainly before a letter of intent (LOI) is drafted (let alone signed), the target’s value proposition to your company (i.e., the acquirer) must be identified and articulated.

To do this, you and your team need to answer some basic questions, including, but certainly not limited, to:

What value will the transaction bring to your company?
Will it expand your footprint?
Will it help you sell new products to your existing customers/clients?
Does the target company have a loyal base of its own existing customers/clients?
To what extent would the acquisition open new channels or markets to your company—assuming such opportunities represent appropriate fits?
How would you qualitatively characterize the target company’s culture? Do you envision a smooth transition post-acquisition, and how well do you really believe each company’s culture will mesh?

The answers to these and other important questions form the basis of the target value statement. Once it’s finalized in written form (it can be a statement, a summary, a series of value points or whatever format best suits your style), you and your team then need to ask the most important question of all:

Does this value statement align with your company’s mission and vision statements?

If it does, then the target company merits further consideration. If it doesn’t, then you should close the case on that company and look elsewhere for suitable targets.

Summing it All Up

Companies consider acquisitions for many reasons. Given the currently low cost of capital and the ever-quickening pace of technological advancement, it makes good sense to at least consider a strategic or financial acquisition if it opens new avenues of growth or unlocks doors to potentially valuable customers/clients.

Whatever reasons may be relevant to you and your team, your first order of business must be evaluating opportunities in relation to your company’s mission and vision statements. Does the target align with your purpose? Will it help you achieve your vision? These are the first questions you must answer. All other questions, steps and decisions emanate from this.

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Jean-Francois Audet, CPA, CIRP, LIT, CBV

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